Shek

Tarek,

A few reasons:

1) Legal patents that spur innovation give temporary monopoly power to pharmaceuticals that come out with new drugs or find new uses for old drugs. These patents aren't overly broad, i.e., drugs that fight the same thing but through a different mechanism provide some competitiion. The patents last 20 years, although by the time a drug makes it to the market, there is typically only 8 years left if I recall correctly.

2) There is little to no monopsony power (think monopoly, but on the demand side) available or exercised in the US. In other words, the state doesn't impose a price control on drugs. For example, Canada may tell a drug company "sell this drug at this rate or else we don't buy". The choice for the drug company is either to accept a low price that earns a little bit of profit or no extra profit at all. This may sound like a good deal, but it reduces the amount of available capital to reinvest back into R&D, which means that it slows innovation.

3) Less health creates more demand in the US market, which drives up prices.

4) Slightly higher wealth means that you'll be willing to pay more as well.

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"So little pains do the vulgar take in the investigation of truth, accepting readily the first story that comes to hand." Thucydides 1.20.3

JAD_333

Did I? I thought I was addressing the author's points thru your summary.


There's a lot of significance in those points, but they don't seem to be pro or con on the issue of cradle to grave universal health care. I am not very smart, but I can see their strawman arguments. Sure, there are probably doctors who won't innovate to save lives unless they make big bucks or talented doctors who won't doctor anymore to make a fortune in cosmetic surgery. That says more about the character of the people entering the medical profession than about extending health care to all.

The issue is, can we lower the cost of health care and make it available to all? Arguments that seem to say no, like the US cannot remain the world's leading innovator of medical technology unless Americans pay more for health care don't address the problem fully. The cost of medical care isn't high just because of the cost of medical machinery. It's higher here than in countries like Japan and Germany because of other factors like the profit element; duplications in administration; decentralization of record keeping, treatment hurdles created by HMOs and the like; and the lack of affordable preventative medicine for low income people, and so on.


There are problem with this argument. First of all treatment costs more here than in Japan or Germany whether you are obese or not. It's true that a less healthy country will spend a greater share of its GDP on health care than will a healthier country like Japan. But how much more is due to inflated costs and how much is due to more sickness? If Japan spends 5% of GDP to cover all its people and we spend 16% of GDP on roughly 80% of our people, are we three time more unhealthy than Japan? Let's say for the sake of argument that we are two times more unhealthy than Japan because of obesity--which is obviously way too high--then our cost should be only twice theirs, or 10% of GDP. Where's the other 5% going if not to treat people? I realize that oversimplifies the GDP figures, but is that not what the counter-argument does when it claims poorer health accounts for higher per capita costs?

What we ought to do is create a model system on paper to see what the cost would be if we extended the same level of health care to everyone; created a single administrative system; centralized medical records and computerized them; gave insurance companies and hospitals a business motive aside from profit-making; capped malpractise awards; avoided over-testing; and set maximum fees for medical services.

Government already funds 48% of the $60+ billion spent annually on private sector bio-medical research. It wouldn't be a great leap to go all the way and fund 100% in exchange for reductions in the cost of acquiring new health care innovations when breakthroughs are made, or to apply some of the profits made on foreign sales to domestic health care costs. We already know from the Swiss example that insurnace companies and pharmacuetical companies will still compete and operate effectively with incentives other than the profit motive.

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gunnut

Sorry for the late reply. I have been sidetracked over the last 3 days.

Yes I did say people do things for money. But you cannot deny the fact that some people do things out of the goodness of their heart (or seeking a different reward, but that's different topic). Under a free market system, those who do things for money can do that and those who want to be charitable can be charitable. Under a "universal" system funded by tax dollars, people are forced to be charitable. That cuts back the incentive for people to be truly charitable. Why should I donate if I pay for a tax that funds a cause already?

Who funds this research? There are already numerous foundations funding researches at college already. And there's a serious problem with government funded university research programs. They are subject to politics. Money flows into "causes of the moment" rather than something that might be more useful.

So that small number of "non-workers" won't get care? What is the minimum amount of work I need to qualify for this government funded universal care? Would I get the same care making $15,000 as someone who makes $75,000?

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Shek

Sorry, you were, but in my haste I didn't see that.

I think that's a bit of a cheap shot by talking to character. Do you want to work in a system where you are constrained, not only by potential salary, but also being told you can't innovate because it will increase costs. It's also a desire for most to want and make more money to provide for their family. Instead of fighting incentives, we should try to figure out how to harness them, and writing off the profit motive as a character issue doesn't help us harness the power of incentives. Why do we see examples of foreign doctors in the US? It's partly to increase the supply of doctors, but by picking from a more diversified field of applicants, you can also raise the talent pool. Put a wage ceiling, and we'll see these people move to investment banking and becoming lawyers.

I agree that there are structural issues we can get at that contribute to the problem.

You're misreading me still. I'm not claiming that the spending gap is all due to relative healthiness, just that we need to make sure we don't overstate the problem. Doing so changes the treatment and then gets us a result that we may not have asked for since it problem was misdiagnosed. I'm not trying to claim that it's all due to relative health differences.

I might be amenable to this if you could explain how we determine to allocate this money and how determine if we are getting ROI. With private investors, if there's no ROI, then your capital dries up. With the government, the accountability is only every 2, 4, or 6 years, and even then, the "shareholders" have to consider a variety of other issues simultaneously, and so the linkage is tenuous.

I still need to watch the Frontline piece, but 1/3 of swiss pharma profits are from the US. You take away the US as a market, and you cut out the cost effectiveness of the Swiss system. There's a lot of feedback that could result from the US adopting certain policies that begin to make the other health systems look less attractive (I didn't say not attractive, but it does diminish some aspects).

cesm

About the European costs : the European countries have more and more obesity problems (specially in UK), and their population becomes older (specially in Germany).

For this :
The theory is good, but... What about the European "first times" and discoveries in health research ?

glyn

[quote=cesm;485987]

The theory is good, but... What about the European "first times" and discoveries in health research ?

Ah, my Gallic friend - you will find great difficulty in trying to explain to an American that any invention or discovery could occur in foreign parts!

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JAD_333

You aren't just misreading me; you're adding something I didn't say. I was speaking about those with the sole motive of making big bucks. When it comes to caring for people's health which invariably leads to life and death situations, a doctor who is in it just for the money and is willing to protect a high income by opposing universal health care, has a character flaw, and there are no two ways about it. That said, I believe a doctor should be able to clear $150-200 K a year and higher if they perform above the norm, and if some want to make more doing cosmetic surgery, that's ok with me. But I don't buy into the notion that all doctors will cease to innovate simply because they aren't making millions.



Now you are misreading me. My point was exactly that we should harness incentives to provide universal health care. There's no other way, IMO. But there are effective motives that can replace the profit motive. A public company is driven for profits to satisfy shareholders. I was speaking of profits AFTER the cost of doing business. So, capital investment and research would continue and would be paid out of revenues as now. But
if we remove the investor from the picture and take the companies private, we can dispense with net profits, taxes, ect., and still motivate the company's CEO on down to deliver a good product and increase efficiency by rewarding them when they succeed. High pay and performance bonuses is a pretty good incentive. So, I am not advocating that individual wage earners earn less than what it takes to care for their families and enjoy a rewarding life. But salaries are not technically profits.

Well, one reason is that it costs so much to go to medical school. Make it free to the most qualified applicants. Why do people join the military? To get rich? Or to perform a service that is rewarding in itself? Ponder that, major.


Then what are we arguing about?


Good. I was just kicking the tires on what I saw as a tricky argument inasmuch as we don't have any way of measuring the cost differential between healthy and unhealthy from one country to the next.

Going back to the definition of profit, more specifically, net profit before taxes, my approach would do away with ROI as such because there would be no more investors. Capital needs, however, along with operating costs, cost of sales, and employee bonus pay (in lieu of stock options), would be computed into the cost of premiums and the premiums would be paid by individuals and the government. (How much each pays would have to be worked out, but the cost to the individual would have to be affordable relative to earnings. Of course, since you won't lose your policy when you lose your job or can't work any longer, the premium might include something to offset the cost of people who can't pay.) As for the government accounting cycles, we can work that out...Fannie Mae it, maybe. Use private sector accounting methods, market projections and so forth. Yeah, it would be a hell of a job, but considering the popular benefit it's worth the effort.


Yes, you're right. Swiss pharmas still earn good money over here while being essentially non-profit in their own market. It wouldn't be so easy for our pharams to do the same since most of their profits come from the US market. Again, it's a matter of finding an effective incentive to replace the profit format. And you'd have to buy back all the privately held equities in them to avoid shortchanging investors. So, it might take a long time to wean the pharmas off of the profit business model. Arbitrarily cutting their profits would deal the equities market a severe blow. You could quarantee investors a set buy-out price and then cut prices of meds to the system, but I wouldn't feel comfortable with that approach unless the lower cost of the meds offset a government buy off. Gradual buy backs at market may be better. I am still thinking out load on this issue. I am not even convinced yet that a universal health care is the way to go. Maybe just systemic changes are enough to lower costs. Either way, I think the goal is to get everyone covered equally.

Shek

The evidence shows that the US innovates more. There will still be innovation that occurs without high profit levels, but I think that you'd be hard pressed to argue that eliminating high profits won't affect the current pace of innovation.

Shek

The US is winning this race.



JAD,

There are ways to measure how this impacts health care spending, i.e., control for obesity's partial effect on health care spending. It's not a tricky argument at all, but rather just good solid econometrics. I don't have the data to do this, but given time and a budget, it wouldn't be hard to do. It'd probably take more time writing for grant money than it would actually doing the econometric work.

cesm

Better, the last sentence is what I say to some very left-wing people. (Maybe without the "high").
But the US proportion between efficiency and costs makes me.. how do you say ? astonished ? (If it's correct in english.)
I know, but I've seen that things are going worse in some European countries. Are they back in the obesity race ? I don't know what are the last "growth" rates.
And I repeat, the fertilty rates and the ageing of the population should be considered to evaluate the (future) cost and efficiency of health cares.

lwarmonger

A lot of innovation is "forced" through R&D... wouldn't that money decrease drastically in this situation?

m1tch311

Alrighty, if the government (US) screws up everything else it can get its hands on then you can bet you bottom dollar (yes your deepest) that they'll find a way to mess up the medical field. My moms a nurse and she dreads universal health care, its like gun control it just appeals to uninformed Americans through poloticians dog n' pony show

'nuff said

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JAD_333

I agree it could be done. First we'd have to identify all the different treatments linked to obesity. Then we'd have to total up what we spend on all of them and then compare that to the total of what we spend on all health care.

But it gets tricky when we start comparing our results to other countries, especially if we want to see who spends more per capita. While obesity may be less of a problem in some countries, they may have more of a problem in other categories of threatment. We can't focus on obesity alone. We'd have to run a country by country balance sheet on all categories of treatment. Better make it a large grant.

ba1025

the whole problem with this argument is when social services relied on charity they failed so miserably the demand for government intervention became great enough a majority of the people were for the social programs. The same thing is happening now. if our private health care system were working we wouldn't be seeing an increasing number of people favoring national health care in spite of huge campaigns by Insurance/Pharma against it. You don't deny more people look favorably on the idea than 10-20-20 years ago do you?

ba1025

yes we need millions spend researching male pattern baldness treatments and erectile dysfunction drugs and advertisement urging us to get our Dr's to prescribe the latest and greatest drug pharma is pushing from Levitra to Lipitor! Drug companies are in the profit business. If there is money to be made researching a drug to cure cancer they do it and they do. They also pour millions into what really are pretty minor issues when looking at the medical problems of the world